The year 1997 was a year that will never be forgotten by Asian countries . It was during that year when several East Asian economies – especially South Korea , Thailand , Malaysia , and Indonesia – went haywire . Their currencies and stock markets plunged , banks failed , real interest rates shot up , exports fell , imports fell by even more , firms shut down , and people who had worked at regular jobs for [banner_entry_middle]

10 or 20 years suddenly found themselves on the street , and anxiety took hold . To say that it shocked the world would be an understatement . Asian economy was in an upswing and the collapse of these currencies put the spotlight on so-called bad fundamentals such as fiscal deficits , trade deficits and inflation . In light of this , many theories have been proposed by academics in a bid to get a clear grasp of the problem that was the collapse of the Asian market . Among these theories include (1 ) failure of Asian government and (2 ) failure of international markets . These are the two theories we will focus on for this

The first theory puts into perspective the trigger of the crisis : sharp reversal of private capital starting in the middle of 1997 . This , in turn , was brought about by various reasons including (1 ) the so-called lack of transparency in company and bank accounts (2 ) weak prudential regulation by the monetary authorities (3 ) poor exchange rate management and finally (4 ) the moral hazards

The fact that most countries gravely affected by the Asian crises were known for bring corruption-ridden did not help the situation at all . On the contrary , it made the situation worse . In fact , a reminder was made to Asian countries by IMF managing director when he admonished that countries must take great care to ensure that their respective affairs are conducted in an irreproachable and transparent manner without the sting of corruption or nepotism involved

In essence , what is being presented in the first theory is the failure of the governments of the affected countries to sustain the growth experienced by these developing nations such as Korea , Japan and China A key argument of the theory , as noted by Wade , is the lack of transparency as well as the lax enforcement of disclosure laws and it was an important cause of the crisis

With respect to the second theory -failure of international markets theory– , a plausible explanation of the Asian financial crisis has to cover several factors . Wade enumerates these factors as (1 ) the increase in frequency of currency and /or bank crises since the 1980s as compared to the period after World War I (2 ) crises have said to be commonly in response to success -which is what the Asian economy was before the financial collapse (3 ) the regional effect of the Asian crisis and finally (4 ) the failure of the people bestowed with the job to… [banner_entry_footer]